Correlation Between ZongTai Real and Hiwin Technologies

Can any of the company-specific risk be diversified away by investing in both ZongTai Real and Hiwin Technologies at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ZongTai Real and Hiwin Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ZongTai Real Estate and Hiwin Technologies Corp, you can compare the effects of market volatilities on ZongTai Real and Hiwin Technologies and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ZongTai Real with a short position of Hiwin Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZongTai Real and Hiwin Technologies.

Diversification Opportunities for ZongTai Real and Hiwin Technologies

-0.5

Correlation Coefficient

ZongTai Real  Hiwin Technologies

Very good diversification

The 3 months correlation between ZongTai and Hiwin is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding ZongTai Real Estate and Hiwin Technologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiwin Technologies Corp and ZongTai Real is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ZongTai Real Estate are associated (or correlated) with Hiwin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiwin Technologies Corp has no effect on the direction of ZongTai Real i.e., ZongTai Real and Hiwin Technologies go up and down completely randomly.

Pair Corralation between ZongTai Real and Hiwin Technologies

Assuming the 90 days trading horizon ZongTai Real Estate is expected to under-perform the Hiwin Technologies. But the stock apears to be less risky and, when comparing its historical volatility, ZongTai Real Estate is 1.45 times less risky than Hiwin Technologies. The stock trades about -0.05 of its potential returns per unit of risk. The Hiwin Technologies Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  21,050  in Hiwin Technologies Corp on September 3, 2024 and sell it today you would earn a total of  2,100  from holding Hiwin Technologies Corp or generate 9.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ZongTai Real Estate  vs.  Hiwin Technologies Corp

ZongTai Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZongTai Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, ZongTai Real is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Hiwin Technologies Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hiwin Technologies Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hiwin Technologies may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ZongTai Real and Hiwin Technologies

The main advantage of trading using opposite ZongTai Real and Hiwin Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZongTai Real position performs unexpectedly, Hiwin Technologies can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hiwin Technologies will offset losses from the drop in Hiwin Technologies' long position.

The idea behind ZongTai Real Estate and Hiwin Technologies Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.